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Forex - Dollar firms on Cypriot bank tax uncertainty

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Shutterstock photo - The U.S. dollar firmed against most major currencies on Tuesday after calls for a taxes on bank deposits in Cyprus continued to spook investors across the globe and chased them to the safety of the greenback.

Expectations for the Federal Reserve to make no changes to monetary policy fueled demand for the greenback as well.

In U.S. trading on Tuesday, EUR/USD was down 0.56% at 1.2884.

The Cypriot parliament earlier rejected a proposal put forth by the E.U. and I.M.F. to slap a one-time tax on bank deposits, though uncertainty as to whether the country goes bankrupt fueled solid safe-harbor dollar demand throughout the session.

Multilateral lenders asked for the tax as part of a EUR10 billion bailout package.

Meanwhile in the U.S., the Federal Reserve began a two-day monetary policy meeting Tuesday, and expectations were widespread for the monetary authority to leave policy unchanged, which bolstered the dollar's appeal.

Better-than-expected housing data did likewise.

The Commerce Department reported earlier that the number of building permits issued in February hit its highest level since June 2008.

Housing starts beat expectations as well, cementing widespread views that the country's economic recovery is gaining steam.

Building permits issued in February rose 4.6% to 946,000 units, above market calls for a 2.3% increase to 925,000.

U.S. housing starts, meanwhile, rose by 0.8% in February to 917,000 units, better than analysts' calls for a jump to 915,000.

The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.07% at 1.5097.

Official data released earlier revealed that the U.K.'s year-on-year consumer price index jumped to a nine-month high of 2.8% in February, in line with expectations, while the monthly CPI rose 0.7%, also in line with expectations, which gave Cable some support.

The dollar was down against the yen, with USD/JPY trading down 0.24% at 95.00, and up against the Swiss franc, with USD/CHF trading up 0.14% at 0.9474.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.54% at 1.0272, AUD/USD down 0.33% at 1.0366 and NZD/USD trading down 0.31% at 0.8240.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.37% at 83.17.

On Tuesday, markets will continue to track events in Cyprus, while the Federal Reserve's statement on monetary policy will move foreign exchange rates as well. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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